Will Sprint’s Multiple Computer Fraud and Abuse Act Lawsuits Highlight the District Court Split on Loss Jurisprudence?

Much has been written about the circuit split with regard to Computer Fraud and Abuse Act access jurisprudence. While this has been the primary focus of attention, there has been a similar divide among the district courts with regard to the loss jurisprudence. Given that the $5,000 loss requirement is the jurisdictional threshold that must be met in order to bring a civil CFAA claim — that is, the gatekeeper — the loss issue could prove to be more important than the access issue when it comes to expanding or limiting the use of the often criticized use of the Computer Fraud and Abuse Act in civil cases.

Sprint’s CFAA Lawsuits In Multiple Jurisdictions

Sprint has gone to war against unauthorized resellers of Sprint telephones who allegedly unlock those phones so that they will operate on a network other than Sprint’s.  For this battle, the Computer Fraud and Abuse Act is one of Sprint’s weapons of choice. Since January 1, 2014, Sprint has filed lawsuits in several different jurisdictions throughout the country in which it asserts claims under the CFAA, including one right next door to me in the Northern District of Texas. Here are 3 that I found rather quickly:

1. Sprint Solutions, Inc., and Sprint Communications Company L.P. v. Alain Martinez, Sr., Cause No. 2:14-cv-00224 in the United States District Court of New Jersey (Complaint filed Jan. 13, 2014);
2. Sprint Solutions, Inc. and Sprint Communications Company L.P. v. Liang Jin Shao, individually and d/b/a Leo’s Computer Repair and Liberty Laundromat, Cause No. 2:14-cv-00545 in the United States District Court, Eastern District of Pennsylvania (Complaint filed Jan. 17, 2014); and
3. Sprint Solutions, Inc. and Sprint Communications Company L.P. v. Zoubi Imports and Exports Inc., Mohammad Abdel Halawani, Ashraf Zoubi and Mohammad Zoubi a/k/a Mohammad Zebi, Cause No. 4:14-cv-00053 in the United States District Court, Northern District of Texas, Fort Worth Division (Complaint filed Jan. 27, 2014).

While the complaints in these three cases are very similar though tailored as necessary to fit the unique facts of each case, the fact that they are in three different jurisdictions will make it interesting to see how the cases fare insofar as the CFAA claims are concerned. Especially how the “loss” analysis will play out for each. There is still quite a bit of evolution going on with regard to the loss jurisprudence in the various districts and quite a few conflicts between them.

The District Court Split in CFAA Loss Jurisprudence

For example, on one end of the spectrum, in the Northern District of Texas we have seen a case allow the value of the trade secret information taken to be used in calculating the $5,000 loss even though there was no allegation of interruption of service. (see post) For the reasons stated in the post, I believe that particular case is an aberration and the other loss cases in the Northern District of Texas bear that out. Nonetheless, the case is still on the books and will need to be addressed by defendants Zoubi Imports and Exports Inc., Mohammad Abdel Halawani, Ashraf Zoubi and Mohammad Zoubi a/k/a Mohammad Zebi should they decide to file a Motion to Dismiss based on whether the $5,000 loss was adequately pleaded.

At the other end of the spectrum, the courts in the Eastern District of Pennsylvania are extremely strict when it comes to calculating the loss. Last year I handled the defense of a CFAA case in the Eastern District of Pennsylvania (yes, “that” case) and thoroughly briefed two motions to dismiss that were heavily premised on the EDPA’s strict loss jurisprudence. (Motion to Dismiss and Motion to Dismiss Amended Complaint) I convinced the plaintiff to dismiss the claims against my client with prejudice before the plaintiff filed a response or the court ruled on the motions, however, I remain very confident that the positions asserted in the motions were consistent with the EDPA’s standards on this issue and would have been successful.

In many of the cases I see, the plaintiff clearly does not have a clue about the requirements of the $5,000 loss for CFAA claims and how to plead that loss and the courts usually dismiss those claims early on. That is not the case here with Sprint and its lawyers. You can tell from their pleading that they know the standard they need to meet and they do a nice job of trying to put together enough of the required points to get there — do they get there? That’s a tough question that could be broken down into a few others:

1. Do they get there under the standards of the EDPA cases (and many New Jersey cases)?
2. Do they get there under the standards of most of the NDTX cases?
3. Do they get there under the standard of the NDTX Meats by Linz case?
4. And, perhaps most importantly, do they get there under a correct reading of Section 1030(g) — that is, my understanding of the section?

Let’s see what happens here.

What does this mean?

I have written extensively about the CFAA’s loss jurisprudence (here) and I find it to be one of the more challenging aspects of any civil CFAA claim as well as an important feature of the CFAA to keep it from being used in civil cases that do not justify “having a federal case made out of it.” What we now see with the multiple CFAA lawsuits that Sprint has filed are:

1. the same plaintiff,
2. with the same lawyer (James B. Baldinger as actual lead counsel),
3. asserting what are essentially the same claims,
4. under the same law,
5. but in different jurisdictions.

This is a great scenario to highlight the district court split on loss jurisprudence under the Computer Fraud and Abuse Act that just may help lead to some clarity and unity on this relatively unnoticed yet crucial issue.

Fortunately for us, defendants Liang Jin Shao, individually and d/b/a Leo’s Computer Repair and Liberty Laundromat, Zoubi Imports and Exports Inc., Mohammad Abdel Halawani, Ashraf Zoubi and Mohammad Zoubi a/k/a Mohammad Zebi, and of course plaintiff Sprint, will bear the expense of fleshing this issue out but we can sit back and learn from their experiences! And, in reading the complaints, I do need to add that I not only see significant issues on both sides with the loss issue, but with the access issue as well (hint: see my post about policies) — these will be fun cases to watch.

Need Help With The CFAA?

Should you or anyone you know need assistance in dealing with possible claims under the Computer Fraud and Abuse Act or just want to talk about cyber law in general, please feel free to give me a call (469.635.1335) or email me (stuma |at| brittontuma.com).